Green Corporation builds custom-designed machinery. A review of selected data and thecompany’s pricing policies revealed the following.
A 10% commission is paid on all sales orders.
Variable and fixed factory overheads total 40% and 20%, respectively, of direct labor.
Gardener Company currently is using its full capacity of 25,000 machine hours to manufacture product XR-2000. LJB Corporation placed an order with Gardener for the manufacture of 1,000 units of KT-6500. LJB would normally manufacture this component. However, due to a fire at its plant, LJB needs to purchase these units to continue manufacturing other products. This is a one time special order. The following reflects unit cost data, and selling prices.
KT-6500 XR-2000
Material $27 $24
Direct labor 12 10
Variable overhead 6 5
Fixed overhead 48 40
Variable selling & administrative 5 4
Fixed selling & administrative 12 10
Normal selling price $125 $105
Machine hours required 3 4
What is the minimum unit price that Gardener should charge LJB to manufacture 1,000 units of KT-6500?